The U.S. stock-market craze for all things to do with electric vehicles is showing its first signs of crossing the Atlantic.
Volkswagen’s VOW 14.18% preference stock, the form of VW equity traded by most investors, has risen 16% this week to a six-year high. The company, which vies with Toyota for the title of world’s largest auto maker by sales, unveiled Monday a new battery strategy resembling that of Tesla. On Tuesday, Chief Executive Herbert Diess pledged to harness VW’s scale by standardizing batteries, software, production and services across its brands, which include Audi and Porsche as well as VW itself.
The German giant finally seems to be enjoying some of the attention lavished on U.S. and Chinese EV specialists, and on some traditional U.S. car makers, notably General Motors, that have bet big on new technology. There was little data to back up the share moves, just plenty of ambition. This isn’t the world of the efficient markets hypothesis—rational calculations of future profits—but one of hope and hype in an industry whose future has become highly unpredictable.
Mr. Diess is unlikely to complain: He has repeatedly weaponized Tesla’s soaring market value to prod VW managers into a more rapid execution of his transition strategy. And a frothy stock price is a competitive advantage in an industry dependent on big capital spending. Tesla raised $12 billion last year by selling shares.
BMW BMW 5.91% also has learned the lesson. It made a raft of EV-related announcements Wednesday, including that at least half of its vehicles would be fully electric by 2030. The shares rose 5% in morning trading.
The Bavarian car maker had previously been reluctant to make big claims about distant EV sales, preferring to tout consumer choice and industrial flexibility. It long resisted pressure to build the kind of all-electric production platform on which VW is now making its I.D.3 and I.D.4 models to rival Tesla’s Model 3. Late last year, though, BMW changed course and said it would have a dedicated EV platform by 2025.
The next debate may concern batteries. VW said Monday it would make the key EV component itself—the first car maker to take this step after Tesla. Previously, the German company was counting, like its peers, on East Asia’s battery giants as well as a joint venture with Swedish startup Northvolt. But fears have been steadily mounting that there won’t be enough batteries to go around.
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BMW continues to talk up flexibility in its battery strategy. It makes roughly a quarter of the vehicles VW does, so its sourcing needs are less daunting. The company also has a battery research facility that it says helps it keep on top of the fast-evolving technology.
Whether this is a tenable position for BMW longer-term remains unclear. Tesla has shown battery technology to be a key driver of EV performance, and it makes sense for a premium brand marketed under the tagline “sheer driving pleasure” to be directly involved. On the other hand, many millennial EV buyers may care more about slick infotainment and software updates—also priorities for investment at both BMW and VW—than nuances of acceleration.
Car makers need to plan years ahead, but right now, the industry could go many different ways. Amid all the excitement about new auto tech, investors should brace for the likelihood that plenty of capital ends up wasted.
Write to Stephen Wilmot at [email protected]
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